All Forum Posts by: Max Zappas

I am curious how investors from the La and Bay areas view real estate investment on the central coast of California? By Central Coast of California I mean from Santa Maria to Paso Robles. Particularly in the multi family residential niche. Let me know your thoughts, feelings on growth, appreciation, values being high or low,  desirability, any insights you might have. Thanks in advance!

@Bobby Lee Yes, the bulk of the depreciation would be in the building but a large chunk(20-30% of asset value) is depreciable much sooner than 27.5 or 39 years. The time value of money is a big deal and you get the depreciation front loaded when using a cost seg. 

@Michael Skoczylas Thank you, we did a cost seg to get that depreciation front loaded like that (20-30% of the purchase price was accelerated to shorter life). I am curious about the first part of your response... Are you saying you can only take depreciation on the new asset with the monies you contribute over and above the amount you are exchanging? 

Would it be wise to sell an asset and 1031 exchange once you've taken the bulk of the depreciation on it? For example, we purchased a portfolio of 142 units and about 20-30% of the purchase price was able to be taken in 5, 7, and 15 year items as a tax write off. If, after 15 years, 20-30% of the value is no longer able to be taken in depreciation, then, wouldn't it be logical to sell so you could get a new asset with new depreciation? 

Try and find a deal, that is the most important thing in these times. If the duplex wasn't enough of a deal to be able to move forward then that is good. You want to be sure you'll hit at least a solid base hit. In times like this, you need to analyze what your exit strategy will be for any given deal and then run stress tests on it to see what you could handle in the event things got worse. For example, run your numbers as you think they will be, then run them with vacancy factors, with lower rents, with longer hold periods, and see if you'll be able to hold on through a downtown. The long and short is, if the deal is good enough, there is never a bad time to invest. So, find a good deal. Off market is a great way to find deals. 

@Account Closed we are about 3-6 months out from breaking ground. We will definitely be doing that once we start signing leases but we haven't gotten any leases signed yet. 

@Hai Loc thank you for the advice! That is the solution I have been landing on as well because the future value will certainly appreciate well due to the location and product. Without the burden of the debt payments and the value of depreciation, the numbers are obviously looking more favorable. 

My partners and I acquired some great real estate in a small downtown and plan to develop a nice mixed-use project to include retail/restaurants on the first floor with condominiums above that on the second and third floors. We are having difficulty in finding the best financing structure to get the project to the finish line. With NNN leases, HOA fees, CAM, some condos for rent and some for sale, the spreadsheets are fairly complex. However, the big hurdle has been that most lenders that we have spoken with want to see the retail component of the project at least 50% leased prior to commitment. They want to see signed leases with all the details confirmed and locked in while our construction process will likely take at least 18 months... Most retailers, local and national, aren't confident signing a lease before the project is underway and while the economy may be at a high point. Likewise, we don't want to lock in lease rates and terms now when the retail market in this particular downtown could appreciate a lot during the tie we are under construction. Does anyone have any advice or creative ways to finance a deal like this when there are so many risks involved and at a time when there is a lot of uncertainty in the marketplace?

@Ben Tilbury No way! It's so cool to find another local BP member! I haven't really seen many local members thus far and I actually updated my profile, made this post, and started to get more involved in the hopes that I could start meeting more local members/investors. Unfortunately, when I found the events page there weren't any events or meetups in SLO county... Not that I could find anyway... How did you find my post? I was hoping to host an event to get the ball rolling but it turns out only pros can do that as far as I've seen... Anyway, I'd love to sit down with you and am available next week as well. Want to grab a drink or something on either Tuesday or Wednesday evening next week? 

@Dan Barli Thank you for your suggestions! Reaching out to all of the local brokers would be a wise decision. At least making contact with them and explaining exactly what it is I'm looking for. I do direct mailing and I am ramping that up as our exchange date grows closer. 

@Alina Trigub thanks for your suggestion! @Dan Barli I sure am looking to acquire, my group has two of our flips in escrow to sell and we hope to close at the end of this month. We would like to invest within a few hours of Atascadero CA. Right now, I have been combing online title maps and programs, the MLS, and LoopNet. Additionally, I have been writing personal letters to owners and making cold calls to owners on targeted properties that appear to fit exactly with what we would like to exchange in to. Do you have any other suggestions? My findings are that "on-market" deals have been priced high so I started trying to find something "off-market". I did find one deal on the market last year that had fallen out of escrow twice and I was lucky enough to follow it since the beginning so I got to pick it up heavily discounted.